Certified Expert in Climate & Renewable Energy Finance

09/2014 – 03/2015

Financing the Green Transformation of

the Philippines –
Analysis of the Climate Adaptation and
Renewable Energy Strategy

17 January 2015

Bituen P. Hidalgo

Paper Number 033

Keywords: climate change adaptation, Philippines, renewable energy

Number of Characters (Including Spaces, excluding References): 19,000

1/6
1. Introduction
In the recent years, climate change has become part of daily news. Climate change is defined under the United
Nations Framework Convention on Climate Change as “a change of climate which is attributed directly or
indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural
climate variability observed over comparable time periods." Based on numerous scientific studies, the activities of
the human race over the last three centuries have caused changes to our planet’s ecosystem which will last for at
least the next millennium. The extreme weather events in the recent decades are mostly attributed to climate
change.

Some countries and cities experience more of the climatic changes than other places. According to a 2011 report
by the United Nations University and the German Alliance Development Works, the top 10 countries most
vulnerable to climate change are Vanuatu, Tonga, the Philippines, Solomon Islands, Guatemala, Bangladesh,
Timor-Leste, Costa Rica, Cambodia and El Salvador. In a recent report by Maplecroft, a global risk analytics and
research company, 32 countries were identifies in its Climate Change Vulnerability Index for 2015 as having
’extreme risk’. This list is topped by the following countries: Bangladesh (1st and most at risk), Sierra Leone,
South Sudan, Nigeria, Chad, Haiti, Ethiopia, and the Philippines. Furthermore, Maplecroft identified the following
cities as having the highest risk from climate change: Dhaka, Manila, and Bangkok. Maplecroft’s measure of
vulnerability to climate change is “based on the evaluation of the sensitivity of populations, the physical exposure
of countries, and governmental capacity to adapt to climate change over the next 30 years.”

This paper will focus on the Philippines, a country in South East Asia with a population of 100 million. Since the
o
1960s, average temperature in this country has increased by 0.5 C as of 2010. Temperatures are expected to rise
o rd
by 2 C in 2050. In the 2011 UN study, it stands as the 3 most vulnerable country. In Maplecroft’s 2015 climate
change vulnerability index, it stands among the top 10 countries with “extreme risk”. Among the cities with the
highest risk to climate change is Manila, the capital city of the Philippines and has 12 million inhabitants. Over the
last 30 years, the Philippines has seen considerable changes in its climate and extreme weather events. The
number and intensity of typhoons have increased significantly. These have resulted to losses in lives, property
and livelihood. In November 2013, the deadliest typhoon, Typhoon Haiyan, hit the Philippines. Over 6,000 lives
were lost, with 1,000 missing, 20,000 injured and with around 9 million persons experiencing damage to or loss of
their homes. The winds of Typhoon Haiyan reached 315 km/h in 1-minute sustained and is among the strongest,
or may even be the strongest, storms in history in terms of wind speeds. With this backdrop, where lives and the
survival of whole communities are at stake, it has been recognized by the general Filipino public and the
government that changes need to take place to adapt to climate change. To see the effectivity and impact of the
strategy and funding requirements of climate adaptation projects, this paper presents an analysis of the Philippine
situation. The institutions and Philippine laws related to climate adaption will first be discussed. Next the trends in
the projects and developments undertaken to adapt to climate change will reviewed. Lastly, the existing gaps will
be explored and recommendations will be presented.

2. Philippine Situation

2.1. History
Over the last 30 years, the notion of “climate change” and the need to adapt and prepare for this has gained slow
recognition among government institutions and the Filipino public. Since the 1980s, various environmentalist
groups have been calling for action to adapt to climate change. In 1991, the government formed the Interagency
Committee on Climate Change, with the aim to coordinate the efforts of the government and civil organisations.
Over the years afterwards, the existence of climate change was recognized by the international community. With
the international consensus that climate change is real and happening and not a hoax, multilateral agencies and
various governments, mostly OECD members, set up organisations and mechanisms to address this global issue.
The Philippine ratified the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto
Protocol. With the Philippines bearing the brunt of climate change, the Presidential Task Force on Climate
Change was established in 2007. After two years, the Climate Change Act of 2009 was finally passed by
Congress. This paved the way for the establishment of the Climate Change Commission. The Climate Change
Commission came up with the National Framework Strategy on Climate Change and the National Climate
Change Action Plan. In line with these developments, the National Disaster Risk Reduction and Management Act
(Republic Act 10121) was passed in 2010. This law created mechanisms for disaster risk reduction and disaster
risk management at the national and local government levels and set aside funds for these.

2/6
The Renewable Energy Act of the Philippines (Republic Act 9513) was passed in 2008. While the implementation
of this law will help promoting clean energy and thus mitigate climate change, the main purpose of this law, as
stated therein, is to provide for energy self-sufficiency and electricity generation. Studies show that the
Philippines contribute only around 147.59 MtCO2 or 0.3% of the global total GHG Emissions (Including Land-Use
Change and Forestry) in 2011 (45,451 MtCO2). It is a common sentiment in the Philippines that while it is one of
the countries most affected by climate change, with its very low contribution to the global GhG emission, it hardly
contributes to causing climate change. As such, from the side of the Philippines, relatively speaking, there is
almost no local GHG emission to mitigate.

2.2. Present situation

2.2.1 Government Response – Strategy and Action Plan

In the National Framework Strategy on Climate Change (“Strategy”), the Climate Change Commission determined
the track to be taken by government institutions and coordination with the private sector. The National Climate
Change Action Plan (“Action Plan”) lists concrete steps and the time scheme (2011 – 2028) during which to fulfil
these actions. The Action Plan covered the following needs which the Commission considers relevant for climate
change adaptation: Food Security, Water Sufficiency, Ecosystem and Environmental Stability, Human Security,
Climate Smart Industries and Services, Sustainable Energy, Knowledge and Capacity Development. Most of
these needs also relate to basic development objectives, such as access to potable water, electricity, healthy air
quality, and access to medical services. These objectives will still exist even if there is no climate change. For
purposes of this paper, the focus will be on projects and activities which will have a direct impact on enhancing
climate change adaptation, from hereon to be referred to as “hard actions”). An example of this is the requirement
to retrofit buildings to withstand extreme climate conditions and the strengthening of coastlines.

Consistent throughout the Action Plan as the first activities are the gathering of baseline information, mapping of
lands, conducting of vulnerability and risk assessments, setting of policies for governance and the like. When the
Action Plan was prepared in 2009-2010, there seemed to be significant lack of information on the factors which
were considered important for pursuing activities and projects which could directly improve climate change
adaptation. For these first activities (information gathering, policy setting activities and the like), the period allotted
is from 2011 to 2016. For years 2017 to 2028, it is only during this period that the Action Plan included “hard
actions”. There are few “hard actions” mentioned in the Action Plan. These are related to reforestation
(implement the National REDD+ Strategy), food and water (implementation of best practices in agriculture and
fisheries, implement water harvesting technologies), disaster management (implement climate change
adaptation-disaster management local plans, improve system for post-disaster health management), and
implement green building principles. These “hard actions” are not yet being undertaken. However, the
government is now allocating funds for these actions. For the proposed climate change funding under the 2015
national budget, government agencies are now “tagging” amounts to be allocated to adaptation measures, such
as flood control, reforestation, sector-specific research and development on climate change, and disaster risk
reduction (DRR).

2.2.2 Trends in Best Practices for Climate Change Adaptation

While the Strategy and Action Plan was being formulated, various government agencies, local governments and
the private sector in the Philippines have, on their own initiative, undertaken actions related to climate change
adaptation. To have an indication of what the best practices are, the government’s Department of Environment
and Natural Resources conducted in 2012 a survey among entities active in adapting to climate change. In this
survey, around 250 of the best practices of government agencies, local government unit, private corporations and
civil organisations were presented. To cover the period after 2012, news and reports from various multilaterals
and intergovernmental agencies (example: World Bank, United Nations) and financial press were checked.
Similar to the trend mentioned above regarding the action plan, most of the existing best practices are related to
basic development objectives. Most common practices are geared towards education, livelihood, awareness on
the impact of climate change and what actions could be taken at the community level. The impact of these
practices will only be felt, if ever, after decades, such as when the children of today become the policy makers.
These activities are almost always donor-funded, are at community level and mostly small-scale. Very few
practices can be considered as “hard actions”. Worthwhile to mention here are the 73 Clean Development
Mechanism projects (as of end-2014) which mostly relate to lower GHG emission production processes and
renewable energy, reforestation to minimize flooding, testing of flora and production processes more suitable to
warmer conditions, development of flood prediction and automated weather monitoring systems, and the
retrofitting for climate-proofing of waterworks systems. These “hard actions” are likewise mostly donor-funded,

3/6
except for the renewable energy projects. Donors are usually international and governmental aid agencies, local
governments, and members of the local community.

2.2.3 Wind Energy Projects

The development of renewable energy projects in the Philippines are mainly for energy self-sufficiency. These
projects are to meet the current power demands. As mentioned earlier, the Philippines contributes less than 0.5%
of the world’s greenhouse gases and thus is there is not much demand for local companies to reduce their GHG
emissions.

As of January 2015, there are 3 operational renewable energy wind parks in the Philippines. The first wind park
began operations in 2006. These projects are financed by financial institutions under lending schemes. In two of
the wind parks, an export credit agency insurance arrangement was used. Revenues are generated from
electricity sent to the grid. Up until 2012, there was no government subsidy. It is only in 2012 that the feed-in-tariff
rates were established by the government. With this development, more projects are being planned. Additional
source of revenue for these wind parks is CDM trading. Below is a short description of these projects.

Northwind Bangui: 33 MW wind turbine power plant, makes use of CDM. Annual electricity generation of 86.7
GWh. The project is made up of 20 units of 70-metre high Vestas V82 1.65 MW wind turbines and developed by
NorthWind Power Development Corporation (“NorthWind”). Financial success of the project depends on CDM
assistance. NorthWind has only been able to obtain financing on the condition that the project is developed as a
CDM activity. The project received financing from the Danish International Development Agency (DANIDA), and
the Philippine Export and Import Credit Agency (PhilEXIM) will act as the loan guarantor on the condition that the
project attains CDM status. DANIDA would have not financed the project without PhilEXIM’s guarantee.

San Lorenzo Guimaras: 54 MW Wind Power Project, makes use of CDM. Project sponsor is Trans-Asia
Renewable Energy Corporation. The wind park has 27 wind turbines with individual capacity of 2.0MW. The
power generated by the proposed project activity will be supplied to the Luzon and the Visayas Electric Power
Grids. Project feasibility depends on the FIT tariff set by the Philippines government. CDM is additional source of
income.

Burgos Wind Farm: 150MW wind park. Project sponsor is EDC, with an investment of $450 million consisting of
$315 million in project financing led by EKF, Denmark’s export credit agency. The park will consist of 50 V90-
3.0MW Vestas wind turbines. It will produce 370 GWh of electricity, enough to power 2 million households and
displace 200,000 tons of carbon emissions per year. The project includes a 115kV transmission line connecting
the windfarm to the national grid. It is the largest wind farm in Southeast Asia. Makes use of CDM.

The project structure and financing of these wind parks are standard practice in renewable energy. The funding of
these projects is not reliant on direct aid donations. These projects are also of much larger scale than the climate
change adaptation activities described earlier.

2.2.4 Comparison of practices with major cities

Major cities around the world have mapped up plans to adapt to climate change. The plans presented by the
cities of New York, London and Rotterdam may be considered as possible model plans and actions for the
Philippines. The plans of these major cities have more “hard actions” included, with a target period of less than
five years and a specific budget. For example, under the New York plan (“A Stronger, More Resilient New York”),
the time allotted for data gathering and similar activities are from 2012 to 2014. Beginning 2014 and by end 2020,
actions to be undertaken are mainly for coastal protection, making stronger buildings and other structures,
hardening of existing infrastructure for electricity and telecommunications, improve health care facilities, and
resurfacing of key streets.

Of the “hard actions” included in these plans but which are absent from the Philippine plan and best practices, the
most important and relevant are coastal protection (installation of armor stone shoreline protection, raising
bulkhead to reduce inland tidal flooding), roadway drainage improvements, installation of integrated flood
protection system), rebuild structures to meet highest resiliency standards, develop an insurance system, harden
utilities infrastructure, and fixing of streets. These “hard actions” should at the least be done immediately to be
able to protect lives and property in times of extreme weather events, which are expected to occur every year.

4/6
2.3. Recommendation
As compared to renewable energy projects, the activities related to climate adaptation do not seem, at first hand,
to be interesting for investors. Until today, these activities are mostly donor-dependent and are not self-funding
businesses. As such these activities remain small and community based. If tooled with a sound business plan and
sufficient financing, these activities have a bigger chance of becoming larger scale, with the ones resulting to
direct impact gaining more interest from investors and support from the public. Below are recommendations for
parties interested in promoting climate adaptation financing in the Philippines:

 Focus on financing of “hard actions” which will have a direct impact in the short term
(example: strengthen coast lines)
 Change the income generation model of adaptation businesses/projects such that these
will not be reliable on donors and will become self-funding businesses
 Set up policies to steer away from “donor mentality”
 While it is more sustainable to have activities from self-funding businesses, the availability
of grants and aids from donors should be taken advantage of as much as possible. These
are cheap sources of funding.
 Orient on how to get funding and inform businesses how to qualify for these funding
sources
 Set up a special national fund to get direct funding from donors without having to go
through the multilaterals (no need to meet the requirements of the multilaterals, such as the
World Bank)
 Through laws and policies, provide incentive for public-private partnership to finance these
activities, such as climate-proofing of infrastructure and buildings
 Float local bonds to fund local infrastructure projects
 Promote project finance, which is currently at its begin stage in the Philippines
 Arrange agreements with export credit agencies to minimize financing costs

3. Conclusion
As of today, Philippine climate adaptation efforts can be described as in the infancy stage. From the side of the
government and policy makers, information is still being gathered and policies are still to be formulated and
implemented. Only after this period, which is until 2016, will there be concrete actions which are expected to
directly impact climate change adaptation.

On the “practice” side, various parties have initiated activities which they believe will help in adaptation. However,
these are for most part donor-dependent and small scale/community based. Up until now there is a lack of
integration of these activities to create bigger scale and knowledge transfer allowing for replication of the best
practices between the various parties remains minimal.

As the extreme weather events provide risk to lives and property, priority and focus should be given to “hard
actions” and should be done within the shortest time possible. This way, adaptation to climate change and
minimizing its adverse effects will be fulfilled.

5/6
Reference list:

Añonuevo, Euan Paulo C. EDC's Burgos wind farm bags financing award. InterAksyon.com. January 5, 2015.
Website: http://www.interaksyon.com/business/102352/edcs-burgos-wind-farm-bags-financing-award

Baseca, Joel. Strengthening the Philippines’ Institutional Capacity to Adapt to Climate Change (MDG-F 1656)
Final Evaluation Revised Report, 7 June 2012

Claudio, Corazon P. (Editor). Climate Change Adaptation: Best Practices in the Philippines. Manila, Philippines
(Department of Environment and Natural Resources), 2012

Climate of the Philippines, Wikipedia (website: http://en.wikipedia.org/wiki/Climate_of_the_Philippines)

Climate Change and Environmental Risk Atlas (CCERA) 2015, by Maplecroft.

(http://maplecroft.com/portfolio/new-analysis/2014/10/29/climate-change-and-lack-food-security-multiply-risks-
conflict-and-civil-unrest-32-countries-maplecroft/)

Climate Change Commission. National Climate Change Action Plan 2011 – 2028.

Climate Finance and the Clean Development Mechanism (CDM) in the Philippines – Philippine Movement for
Climate Justice (PMCJ) presentation. Website: http://carbonmarketwatch.org/wp-
content/uploads/2012/06/climate-finance-and-the-clean-development-mechanism-cdm-in-the-philippines-.pdf

New York City Government. A Stronger, More Resilient New York. 2013. Website:
http://www.nyc.gov/html/sirr/html/report/report.shtml

Russ, Hillary. New York lays out $20 billion plan to adapt to climate change. Reuters. June 11, 2013. Website:
http://www.reuters.com/article/2013/06/11/us-climate-newyork-plan-idUSBRE95A10120130611

UNFCC. Northwind Bangui Project Design Document Form (CDM PDD). Website:
http://cdm.unfccc.int/filestorage/8/8/8PNELZTW0JDIYXGSO5B19FHC4RKAVU.pdf/0453%20PDD%2026%20Jul
%2012.pdf?t=YmF8bmlhMTgzfDAHhli2MloG8Oyf0_i9JW4F

UNFCCC. San Carlos Guimaras Wind park Project Design Document Form. Website:
http://cdm.unfccc.int/filestorage/1/r/3ZJQSD6CXKV4RU2HY8A0OFB5TE1MNL.pdf/ESBI_SL_Final%20PDD.pdf?t
=WEd8bmlhMnN5fDDS_smKlyYv7E4Z7IdihILk

What are the potential impacts of climate change on the UK? The Guardian website.
(http://www.theguardian.com/environment/series/the-ultimate-climate-change-faq)

6/6